GERMANY and France, Europe’s two major economies are facing a collapse in industrial production, but are the countries on the brink of a recession?

Germany is on the brink of a recession after a shock plunge in industrial output. Industrial production in Europe’s financial powerhouse dropped by 1.9 percent in November and by -4.6 percent year-on-year - the biggest drop since the 2008 crisis. And Germany’s exports fell by -0.4 percent month over month in November, the government reported on Wednesday.

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Claus Vistesen of Pantheon Macroeconomics told Business Insider: “Yesterday’s manufacturing data in Germany provided alarming evidence of a much more severe slowdown in the second half of last year than economists had initially expected.”

German exporters are struggling with weaker global demand and trade disputes driven by US President Donald Trump’s policies.

The country has the largest economy in Europe, so a detrimental decrease in its economy, can have a knock-on impact on other countries, such as France, Italy and Greece.

Greece is still struggling to recover from its debt crisis and Italy is likely already in a recession.

Europe IN CRISIS: Germany's industrial production has slowed down dramatically (Image: Getty )

Germany’s leaders have an outsized influence on the rest of the EU and the European Central Bank.

The unexpected fall in Germany’s industrial output helped to weaken the euro.

Even though the drop was modest, it underscored concerns about a slowdown.

Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington, said: “The euro had its upturn halted by German data showing the third decline in as many months in a gauge of factors growth.

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“Another decline in the fourth quarter would signal recession, a scenario that would jeopardise an ECB rate hike this year and likely increase headwinds on the single currency.”

The ECB said it plans to leave rates unchanged through the summer of 2019.

Germany faces its lowest industrial productions since 2008.

The country’s economy shrunk by 0.2 percent in the third quarter of 2018, another drop in the fourth-quarter would mean Germany will have entered a recession, defined as two straight quarters of negative output.

Europe IN CRISIS: If there is another drop in the fourth quarter Germany will be in a recession (Image: Getty )

The collapse of Germany industry was so steep and so sudden that Vistesen said he believed the data was inaccurate.

He told clients: “The crash in the year-over-year rate is far in excess of anything remotely believable, at least using survey data as a yardstick.”

Not only is the Germany economy faltering, but French data pointed to a slow down in production as well.

Data showed a 1.3 percent fall in industry output in November, which left production down an annual 2.1 percent, the most in four years.

Europe IN CRISIS: The yellow vest protests in France have not helped the economy and production (Image: Getty )

The fall could in part be attributed to the yellow vest protests as consumer spending was affected by the numerous road and shop closures triggered by the demonstrations.

After two quarters of negative growth, industrial production growth only each 0.7 percent in the third quarter.

Experts predict another contradiction in the fourth quarter because of the ‘yellow vest’ crisis and its rising impact on domestic demand.

Industrial production is likely to grow only by 0.5 percent in 2018 and 1 percent in 2019, which means even though production has declined, the country is not facing a recession.